Regulatory Capture Vitiates State Action Immunity

The Supreme Court has ruled that when an oversight mechanism created by a State—here a State Board—is under the control of those it was supposed to be regulating (sometimes referred to by economists as “regulatory capture”)¹, anticompetitive actions taken by the State Board on its own without further official government review or approval enjoy no immunity under the state action doctrine. North Carolina State Board of Dental Examiners v. Federal Trade Commission, 574 U.S.___, 135 S.Ct. 1101 (Feb. 25, 2015) (“N.C. State Board“).

FACTS

North Carolina’s Dental Practice Act (“Act”) created a State Board of Dental Examiners (“Board”) to regulate the practice of dentistry. The Act provided that six of the Board’s members were dentists elected by dentists. A seventh member was a dental hygienist. The eighth member was the “consumer” member and appointed by the Governor. The Board’s rules and regulations could be approved, when appropriate, by a Rules Review Commission